Where Business And Law Come Together

Shareholder disputes: A compounded risk for businesses

On Behalf of | Dec 17, 2020 | Dispute Resolution

No matter the size of the business, shareholders can play a large and influential role. They are an important part of the business world.

Yet clashes between business owners and shareholders can quickly lead to complex situations for Minnesota businesses, as a recent case illustrates.

Shareholder disputes can escalate quickly

Pinterest, the popular social media company, faced a wave of conflicts this year. Recently, these conflicts became a much larger issue for the company as Pinterest’s shareholders filed a derivative lawsuit against the company’s executives.

The shareholders moved forward with the lawsuit claiming that the executives:

  • Breached their fiduciary duty to investors
  • Failed to address serious issues of discrimination within the company

Pinterest recently settled one of the discrimination cases facing their company. However, that is not the end of their legal troubles. They must still manage the lawsuit their shareholders brought on behalf of the company itself.

How can business owners avoid challenges like this?

Most business owners strive to avoid litigation if they can help it. And keeping matters out of court is especially beneficial in shareholder disputes as well, since these disputes:

  1. Place the relationship between owners and investors at risk
  2. Often involve conflicts over the actual operation of the business

Therefore, business owners must take these matters seriously. Even if they do not face disputes at the moment, owners should take extra care to:

Shareholder disputes could put the future of the business in jeopardy. However, a careful strategy and proactive action can reduce the risk of disputes long before they arise.